KUALA LUMPUR: A dramatic fall in IFCA MSC Bhd’s share price yesterday brought Bursa Malaysia’s best performing stock of 2014 back into the limelight, but for all the wrong reasons. The software firm, however, assured investors that its recent share performance is just a blip that “is nothing to be worried about”.
Continuing its week-long decline, IFCA’s share price fell from its all-time closing high of RM1.84 on May 18 this year to end yesterday at RM1.38 with a market capitalisation of RM761.66 million.
It was the third most actively traded stock on Bursa Malaysia with over 56.65 million shares done as it shed 14.81% or 24 sen. It was also the 13th top loser on the bourse.
Regulators found the decline shocking enough to warrant an unusual market activity query, asking if the bourse’s usual star performer has an explanation for its “sharp drop in price recently”.
IFCA chief executive officer Ken Yong told The Edge Financial Daily that a combination of agitated investors and market imagination following the resignation of the company’s chief financial officer (CFO) Voo Lip Sang on May 22 is the most likely explanation for the company’s share price fall.
Voo resigned “to pursue other career opportunities”. Yong added that Voo, who was appointed as IFCA CFO on Dec 30, 2014, was “still on probation” and had resigned because of the workload which comes with the job title.
“It is probably bad timing. A lot of people started to speculate about the state of our accounts when our CFO resigned two days after our first quarter (ended March) (1QFY15) financial results announcement was made. But there is nothing to be worried [about].
“I want to tell the market that Ifca’s accounts are audited by independent auditors (Messrs UHY) and there is absolutely no need for a company like ours, which can generate healthy revenue, to be subject to any manipulation or speculation of our accounts,” Yong said.
IFCA moved swiftly to appoint a new CFO Chow Chee Keng yesterday, to stem further speculation. Chow was previously IFCA CFO from Feb 1, 2013 but was redesignated as head of IFCA’s education and training division on Dec 31 last year.
Further, Yong said, the numbers in the company’s audited accounts “cannot lie” and there is no reason for a “fast-growing” company like Ifca to manipulate them.
“IFCA is a company that is still growing very fast. That is the nature of our business as a software company. A lot of people approach us to offer us work and to work with us in some way. We have just seen our strongest quarter to date and those numbers cannot lie.”
“If you look at our accounts, we have been very prudent and the cash pile in our bank account cannot lie,” Yong said.
For 1QFY15, IFCA saw its revenue more than double from a year ago to RM31.98 million, with a net profit of RM9.69 million, up 143 times from RM421,000 in the same period last year. Its cash pile as at 1QFY15 stood at a remarkable RM53.81 million, an 89% year-on-year growth.
The sterling results notwithstanding, IFCA has come under selling pressure. A day after its 1Q results were announced, the stock fell 15 sen from RM1.82 to close at RM1.67 on May 21. It has continued to slide since. Perhaps IFCA (fundamental: 3; valuation: 0.8)’s believers can seek comfort in a CIMB Research note dated May 22, which reaffirmed the research house’s “add” call on IFCA with an increased target price of RM2.04. It also pointed out that it is “not a surprise” to see the stock come under selling pressure.
“Its share price came under selling pressure yesterday, which is not a surprise as the stock’s trading pattern is usually “buy on rumours, sell on news”. Further, price weakness would be an opportunity to accumulate,” CIMB Research said.
The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.
This article first appeared in The Edge Financial Daily, on May 26, 2015.